Insights & Resources

Taking less from your RRSP can lead to more tax later. It shows up when someone keeps withdrawals tiny in their 60s, then finds that an extra $10,000 in their 70s barely changes after-tax cash, or Old Age Security (OAS) starts getting clawed back. The issue usually isn’t whether you’ll pay tax on RRSP/RRIF money. It’s when you’ll pay it, and whether you’re choosing the timing or having it chosen for you.

This article assumes you’re an Ontario resident and we’re talking about personal RRSP/RRIF money. The right approach depends on your other income, whether OAS has started, and how much TFSA room you have. The goal is a practical drawdown timeline you can actually use: how to make the most of lower-income years, how to pick a yearly withdrawal target without stumbling over bracket edges or clawback, and where CPP and OAS timing fits into the plan.

Why the quiet years matter (and why “minimum only” can backfire)

For many retirees, the best planning window is the one that feels the least urgent. You’ve stopped working, but CPP and OAS haven’t started yet. You might have a bit of consulting income or none at all. In these “quiet years,” taxable income is often lower and simpler, which gives you options.

The common default is: “I’ll leave the RRSP alone. Less withdrawal means less tax.” It feels safe because nothing bad happens immediately. But the calendar keeps moving. By December 31 of the year you turn 71, your RRSP must convert to a RRIF. After that, the RRIF begins forcing taxable withdrawals every year whether you need the income or not.

The minimum withdrawal rate starts around 5.28% at age 71, and it increases as you get older. If you’ve delayed withdrawals for years and the account has continued to grow, those required withdrawals can be larger than you expected. Then CPP and OAS stack on top. That combination can push you into higher marginal tax brackets and increase the chance of OAS clawback.

The real issue is the bracket edge, not your average tax rate

Once you decide to start withdrawals, the next question is usually: “How much can I withdraw without getting crushed on tax?” The answer is less about your average tax rate and more about the edge of the next bracket.

Your average tax rate is a summary of what happened across the year. But your next RRSP/RRIF dollar gets taxed on top of everything else you’ve already earned. Think of your total taxable income as a bucket that fills up through the year. A withdrawal is poured in at the end. If that next pour crosses a line (a bracket edge), that slice is taxed at a higher marginal rate.

In 2026, the first federal bracket is 14% up to about $58,500 of taxable income. Ontario’s first bracket is about 5.00% up to about $53,008. Those rates stack, and Ontario also has additional pieces like surtax and the health premium, which can make a “small” extra withdrawal feel much less small.

A repeatable approach: bracket-filling

Once you understand bracket edges, the most practical drawdown habit is often bracket-filling. It’s not fancy, but it’s repeatable and easy to review each year.

Here’s the basic sequence:

1. Estimate your other taxable income for the year (pensions, part-time work, rental income, dividends).
2. Choose a cap, often a specific tax bracket edge (your “lane”).
3. Withdraw from your RRSP/RRIF up to that cap.

One of the biggest mental hurdles is the assumption that a withdrawal must equal spending. “If I don’t need it, why take it?” But RRSP/RRIF withdrawals aren’t only about funding lifestyle. They can also be about reducing future forced income and moving money into accounts that are treated better later.

OAS clawback is a second bracket (and it stacks with tax)

Once OAS starts, you get a new line in the sand that doesn’t show up on the basic tax-bracket tables: the OAS clawback threshold.

The recovery tax works like this: the government takes back part of your OAS when your net world income is high enough. The clawback rate is 15% on income above the threshold. For the benefit period between July 2026 to June 2027, the recovery threshold is $93,454, based on the 2025 tax year.

Why it matters: clawback stacks on top of your marginal tax rate. So if you’re already in a higher bracket, adding a 15% recovery on the next dollars can make the effective marginal rate jump quickly. That’s the predictable reason people say, “I barely kept any of that withdrawal.”

Planning options when you’re near the clawback line:

• Treat the clawback threshold like a second bracket edge for those years.
• If you need extra spending money, TFSA withdrawals can help because they don’t show up as taxable income and don’t count toward OAS clawback income.
• Consider drawing a bit more from your RRSP earlier (in the quiet years) so you don’t have to pull as much once OAS is in play.

The key nuance: it’s not always wrong to cross the line. Sometimes it’s fine, even smart, to accept clawback in a specific year for a planned one-time drawdown. The goal is to make it a decision, not an accident.

CPP and OAS timing

Delaying CPP and OAS is often presented as the “smart” move: larger cheques later. Those increases are real. But with meaningful RRSP savings, the timing decision changes your tax picture as much as your income picture.

CPP increases by 0.7% per month if you delay after age 65, up to 42% at age 70. If you start early, it decreases by 0.6% per month, down to 36% lower at age 60. OAS has its own delay bonus of 0.6% per month after 65, up to 36% at age 70.

The planning problem is simple: you still need income while you’re waiting. For many households, that income comes from their portfolio, often the RRSP/RRIF. A common trap is delaying CPP and OAS while also keeping RRSP withdrawals tiny to “avoid tax.” The RRSP stays large, the RRIF conversion happens at 71, minimum withdrawals rise, and the retiree ends up with the income spike they were trying to avoid.

A more balanced approach uses the gap years on purpose.

If you’re single, RRSP drawdown is also estate planning

There’s a version of RRSP planning that has little to do with your spending and everything to do with your final tax return.

If you die with a large RRSP or RRIF, the fair market value is often treated as income on your final return, unless an eligible rollover applies. With a spouse or common-law partner, there’s often a rollover that can defer the tax. But if you’re single, widowed, or you expect the survivor won’t use the rollover, that deferral may not be available. Then the “tax timing” issue can turn into a “tax pile-up” issue.

Many people assume estate costs are mostly probate. Probate is real, but for many families the bigger hit is the income tax on registered assets. It’s also quieter, because no one sees it until the final return is filed.

As a reminder of how the pressure can build: if you only take minimum withdrawals for years, the RRIF can remain large for a long time, and the minimum percentage rises as you age. For reference, RRIF minimums are almost 7% at age 80 and almost 12% at age 90. That means the forced income often gets larger later, not smaller.

Wrap-up: a simple annual checklist for an RRSP drawdown plan

At the core, RRSP planning comes back to one idea: your RRSP tax bill doesn’t vanish. You’re choosing the year it shows up.

A helpful way to keep the plan honest is to ask these 3 questions each year:

• Am I in a quiet income year where I can withdraw with less tax damage?
• If I withdraw more, what edge am I about to cross: a tax bracket edge or the OAS clawback line?
• If I don’t need the cash, where does it land next so it stays useful (TFSA first if there’s room, then non-registered)?

Small, planned moves tend to beat one big, forced mess. Early withdrawals are often not about spending more. They’re about reducing the future RRIF squeeze. And once OAS is in play, it’s worth treating the clawback threshold like a real line, not an abstract rule.

We are here to help you meet your investment goals and we welcome your questions. We work with business professionals, executives, and families to grow and protect their wealth. To discuss our approach and if it is the right fit for you, we invite you to schedule a no-obligation discovery consultation.